Securities markets are the consequence of financial intermediation through which savers and investors do not relate to each other directly and decide to do so through intermediaries. The intermediary facilitates the sale and purchase transactions in exchange for a commission.
The securities system is typical of Anglo-Saxon countries, being a subsystem located within the financial system and composed of a large number of financial instruments or assets, as well as institutions and intermediaries whose primary function is to be the nexus of union between buyers and sellers.
Financial instruments are the procedures used to carry out an exchange of resources from one economic agent to another, normally constituting the material aspect of a financial movement. This definition includes the concept of certificate or book entry that is issued by an agent, and that constitutes a means to maintain wealth for the person who owns it and a liability for the person who generates it.
Those economic spending units that want to collect resources to undertake their spending plans, either because they are in a deficit position or because they want to cover temporary gaps issue the so-called primary financial instruments. These instruments are acquired by economic agents with a surplus that hold them for a certain time and can be transferred before maturity between agents. Finally, financial intermediaries also acquire some of the primary securities and issue others that are more similar to preferences, called indirect financial assets, carrying out a transformation process that facilitates the movement of money
In order to be able to speak of the securities market, it is necessary that:
- There are free competition and number of participants.
- There is a homogeneous product.
- There is transparency in pricing.
A market can be classified from the viewpoint of funding sources into:
- Money and debt market.
- Stock market.
A market can be classified by its functions in:
- Primary or issuance market.
- Secondary market.
A market can be classified by its structure in:
- Organized markets.
- Over the counter (OTC) markets.
A market can be classified by its legal status in:
- Official markets.
- Unofficial markets.
Those intermediaries that take part in the securities markets are:
- Broker.
It is the agent (either person or corporate) whose function is to act as an intermediary between the buyer and the seller for securities transactions in exchange for a commission, without taking proprietary positions.
- Dealer.
Unlike the broker, it can act on its own behalf, which involves a risk when taking positions and managing its own portfolio of securities.
- Market Maker.
The market maker is willing to buy and sell a series of securities at published prices, thus ensuring that there is a market for the assets being dealt with, such as currencies.
